When Should Organizations Change Their Mix of Products?


To formulate an optimal product mix, managers need to understand how departmental budgets and information sharing within a company can affect decision making, according to a new study co-authored by CBS ECON professor Peter Bogetoft and Yale SOM’s Rick Antle.


Here’s a common dilemma in an organization: One team relies on another team to supply outputs, and the supplying department claims that it needs a certain budget to meet those demands. However, the supplying team may be inflating its cost estimates in order to give itself a comfortable cushion.

“People like to pad their budgets,” says Rick Antle, the William S. Beinecke Professor of Accounting at the Yale School of Management. “They like to get more resources.” This near-universal tendency for departments to leave themselves a little leeway can end up distorting the final choices managers make about product mix—creating a tendency to stick with existing proportions.

Read the article published by Yale School of Management

The page was last edited by: Department of Economics // 01/05/2018